United States: Massachusetts Paid Family And Medical Leave Part 2: Key Differences In The Revised Regulations

In our last blog post on Massachusetts Paid Family and Medical Leave ("MAPFML"), we reviewed the Department of Family and Medical Leave's (the "Department") draft regulations published in January 2019 and outlined some of the questions left unanswered by the then-current regulations.  Since January, the Department has held a number of listening sessions throughout the Commonwealth soliciting comments and feedback on the draft regulations.  On March 29, 2019, the Department published revised draft regulations for public comment and hearing.  The regulations are set to be finalized on July 1, 2019, which is also the effective date of MAPFML and the commencement date for payroll deductions from employee paychecks. 

This post provides a high-level overview of some of the key changes in the revised regulations, and delves more deeply into some of the most common questions (and answers!) that are still plaguing employers as a result of the developments in the regulations.

Key Differences in the Revised Regulations

  • Scope – The revised regulations provide additional clarity on when an out-of-state employer and an out-of-state worker will be subject to MAPFML, discussed in greater detail below.
  • Concurrency with Massachusetts Sick Leave – The revised regulations clarify that, in addition to the Family and Medical Leave Act ("FMLA") and Massachusetts Parental Leave, MAPFML will run concurrently with leave provided under the Massachusetts Earned Sick Time Act. However, this revision to the regulations exposes an inconsistency with the MAPFML statute, which states that an employer may not compel an employee to exhaust rights to any sick time while taking MAPFML.
  • Temporary Employees Excluded from Workforce Headcount – Temporary employees are now excluded from an employer's workforce headcount. Meaning, employers that use staffing agencies to hire temporary workers will not count these temporary workers in their headcount (rather the staffing company will count these workers as covered individuals).
  • Reduction of MAPFML by Short-Term Disability Benefits – The revised regulations clarify that unless the aggregate amount of short-term disability and MAPFML benefits that an employee receives would exceed that employee's average weekly wage, the MAPFML weekly benefit amount will not be reduced by a short-term disability benefit provided by the employer (examples are discussed in more detail below).
  • Substitution of Employer-Provided Paid Leave – The revised regulations provide that MAPFML-eligible employees have the option to use accrued paid leave rather than apply for paid benefits under MAPFML, which presents additional questions outlined below.

To comment on the draft regulations during the public comment period please follow this link.

Scope - Which Employers Does MAPFML Apply To?

Multi-state employers with employees in Massachusetts are deciphering how MAPFML applies to their business and workforce.  The revised regulations outline the following test, which applies to determine both whether a business and whether an individual are subject to MAPFML:

  • An employer and individual are covered by MAPFML if the service provided by an individual is "localized in the Commonwealth."  A service is "localized in the Commonwealth" if the service is (1) performed entirely within Massachusetts, or (2) is performed both inside and outside of Massachusetts, but the work performed outside is incidental to the services performed in Massachusetts.

    • Example: Fred lives in New Hampshire but commutes into Boston every day to work for his employer.  Fred's services are performed entirely within Massachusetts (even if he does not live here).  Fred is a covered individual under MAPFML.
    • Example: Sarah drives a transport truck in Massachusetts for her employer but occasionally drives to New Hampshire to pick up supplies.  Sarah is a covered individual because the services she performs outside of Massachusetts are incidental to the work performed inside of Massachusetts, and her work is localized in Massachusetts.
  • An employer and individual are also covered by MAPFML if the service provided by the individual is not localized in any state, but some part of the service is performed in Massachusetts and (1) the individual's base of operations is in Massachusetts, or if there is no base of operations then if the services are directed or controlled from within Massachusetts; or (2) the individual's base of operations or place from which such service is directed or controlled is not in any state in which the services are performed, but the individual's residence is in Massachusetts.

    • Example: Mark is a software salesman covering territories in the Southwest United States.  His employer's headquarters are in Massachusetts, where he often attends meetings and receives instruction from on which products to sell.  Part of Mark's services are performed in Massachusetts, and his services are directed and controlled from within Massachusetts.  Mark is a covered individual.
    • Example: Angela works in Connecticut as a consultant for a Connecticut employer but works remotely and lives in Massachusetts. Even though Angela's services are not directed or controlled in Massachusetts, part of her services are provided in Massachusetts and she lives in Massachusetts. Angela is a covered individual.

The bottom line is that employers outside of Massachusetts can still be covered employers if they have employees or contractors working or living in Massachusetts.

Staffing Agencies and Temporary Employees

The revised regulations struck temporary employees from an employer's average workforce head count, clearing up some of the confusion for those employers operating in the staffing world or who engage temporary employees.  Employers that use temporary workers as part of their workforce are not required to count temporary employees, but they are still required to count seasonal workers and independent contractors. 

  • Example: Regional Staffing Co. staffs 25 temporary factory workers with Candy Co. Ltd.  In addition to its temporary workers, Candy Co. Ltd. has 25 full-time employees, 15 part-time employees, and 10 independent contractors working at its factory.  Candy Co. Ltd. must include all employees and independent contractors in its workforce headcount, but can exclude Regional Staffing Co.'s workers.  Regional Staffing Co. must count the 25 employees it staffed at Candy Co. Ltd. in its workforce headcount.

Short-Term Disability and Other Paid Employer Benefits

The revised regulations provide that unless the aggregate amount a covered individual receives would exceed their average weekly wage, the weekly MAPFML benefit amount will not be reduced by a temporary disability policy or program of the employer.

  • Example: Katie earns $4000/week and is entitled to the maximum MAPFML benefit of $850/week (based on the Division of Unemployment Assistance's average weekly wage from October 1, 2018 of $1383.41).  Katie goes on short-term disability leave provided by her employer, which covers 60% of her wages up to $2000.  Katie will receive both MAPFML benefits and her Company-provided short-term disability benefits, because the aggregate amount of benefits ($2850) does not exceed her weekly wage of $4000.
  • Example: Bob earns $600/week and is entitled to a MAPFML benefit amount of approximately $480 (based on the Division of Unemployment Assistance's average weekly wage from October 1, 2018 of $1383.41).  Bob goes on short-term disability leave provided by his employer, which covers 60% of his wages up to $2000 (i.e. $360). If Bob were to receive both the MAPFML benefit of $480 and his short-term disability benefit of $360, he would receive $840 in benefits, more than his average weekly wage of $600.  His MAPMFL benefit would therefore be reduced so the aggregate amount does not exceed $600. Bob would receive $240 of MAPFML benefits.

Short-Term Disability and Private Plan Exemptions

The Department has also clarified that it will be accepting private plan exemptions on April 29, 2019 (recall that benefits under a private plan must be greater than or equal to those provided under MAPFML). Employers will be able to apply for exemptions online, and will be notified immediately of approval or denial.  Note that even if a private plan is approved as exempt, employees will still be entitled to MAPFML protections, such as the right to an appeal if their application for benefits is denied, the right to job protection during any leave taken, and protections against retaliation from taking leave or exercising MAPFML rights.  Employers with exempt private plans will not be required to remit payments to the MAPFML Trust.  

Many employers are also hoping that their private, short-term disability insurance policy might qualify as an exemption under the medical leave portion of MAPFML.  While this may be so in some cases, most short-term disability policies are not available for part-time or seasonal workers.  On this basis alone, many short-term disability plans will not be eligible for exemption. For more information on private plan exemptions, please visit the Department's Employer Guide to MAPFML.

Substitution of Employer-Provided Paid Leave

The revised regulations state that employees may choose to use accrued paid leave provided by their employer rather than applying for the MAPFML benefit.  The regulations additionally state that employees may not be compensated with MAPFML benefits for a period of time for which the employee is receiving compensation through the use of accrued paid leave.  This language creates another perplexing issue for employers: are employers entitled to require eligible employees to first apply for MAPFML benefits before being entitled to an employer-provided paid leave?  For example, can an employer create a paid parental leave that grosses up an employee's pay to 100% after requiring the employee first applies for MAPFML benefits?  The revised regulations are unclear on this question.

Conclusion

While the revised regulations provide clarity in some respects, they are not yet final and s unanswered questions remain.  The Department will continue to solicit feedback from the public on the regulations, which will be finalized on the first day MAPFML goes into effect. The Department has published a significant amount of useful materials to help employers better prepare for the upcoming effective date of the law, including a contribution rate calculator, MAPFML timelines and graphics explaining the breakdown of family and medical contributions. For additional information about what employers should be doing ahead of July 1, 2019, please see our previous blog post on this topic and stay tuned for further blog updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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